Utah’s nonprofit sector consists of 11,692 organizations. These nonprofits in the state of Utah hire 124,954 workers and earn approximately $19 billion in revenue per year.
Some of the most successful nonprofit organizations in Utah include Best Friends Animal Society, Youthlinc, and Stepping Stones International.
Starting a nonprofit in Utah includes completing and filing the relevant forms with the relevant government agencies. It also means complying with federal and state laws.
It could take anywhere between two weeks to three months to get your nonprofit up and running. However, once a nonprofit has been formed and incorporated with the state, it will enjoy various benefits, including discounts on US postal services and funding from private foundations and government organizations.
The following step-by-step guide will show you how to go about starting a nonprofit in the state of Utah.
1. Select a name for your organization
The first step in incorporating your organization with the state is deciding on a nonprofit name. You’ll need to use your discretion when choosing a name for your nonprofit, as it needs to be easily searchable by potential stakeholders, sponsors, and donors.
Additionally, it should also comply with Utah naming requirements. When choosing a name for your organization, ensure that it doesn’t include any organizational designations such as Ltd, Inc, company, or incorporated.
The official guidelines for naming Utah-based companies will be helpful in deciding on a name for your organization.
Additionally, conducting a name search on the state of Utah website is equally helpful to ensure that another business entity in Utah hasn’t already used the name.
In the event you plan on setting up a website for your nonprofit organization, checking that the name is available as a web domain is highly advised.
2. Nominate a Utah registered agent
Registered agents go by many names. They are often referred to as resident agents, statutory agents, and service of process agents. However, they also have one common goal within an organization: accepting service of process on the businesses behalf.
Registered agents are individuals that are responsible for receiving important legal documents, official mail, and service of process on an organization’s behalf in the event that it is sued.
Ultimately, a registered agent is your business point of contact with the state.
You may choose to nominate anyone as the nonprofit organization‘s registered agent; however, they must meet the following requirements:
- The Utah registered agent must be 18 years of age or older
- The Utah registered agent must be a resident of the state and have a business address in the state
- The Utah registered agent must consent to the appointment
- The Utah registered agent must maintain normal office hours
3. Recruit your board members
Nonprofits in Utah must elect a Board of Directors. The Board of Directors is made up of an incorporator, a number of directors, and officers as well.
You’ll need to start by recruiting an incorporator who will be responsible for signing your organization’s Articles of Incorporation. You only need to nominate one person to fulfill the role of your organization’s incorporator. However, some organizations choose to have more than one incorporator.
Next, you need to have at least three directors who have no relation to each other. They must be natural persons of 18 years of age or older. However, they do not need to reside in the state, nor do they need to be stakeholders in the nonprofit. The term of service for all directors is one year.
Lastly, you need to the crew to Utah officers. The officers will serve the roles of president, treasurer, and secretary. They need to be natural persons of at least 18 years of age or older.
4. Consent to bylaws and conflict of interest policy
Your Utah nonprofit will need to compile specific governing documents prior to filing the Articles of Incorporation. These governing documents are regarded as the bylaws and Conflict of interest policy.
The bylaws are the rules that outline the operating procedures of the organization. It will be used to decide the frequency of board meetings and the formalities of running the nonprofit.
The Conflict of interest policy, on the other hand, is a collection of rules that are set in place to make sure that board members and stakeholders are not making decisions that benefit their own personal agendas but instead are working towards the nonprofit’s primary goal.
Both of these governing documents should be kept on file and used as your nonprofit’s internal management handbook. They do not need to be filed with the state of Utah.
5. Select a Utah nonprofit startup corporation structure
The state of Utah has different types of nonprofits or organizational structures. Deciding on the legal form for your organization is an essential part of this process.
Usually, public charities take the legal form of a nonprofit public benefit corporation. However, other nonprofits are established as trusts or associations.
It’s suggested that you consult legal advice to determine what legal form is best for your organization. Thereafter, you’ll need the necessary forms available on the Utah Secretary of State website in order to incorporate your nonprofit.
Other types of organizations or types of nonprofits include mutual benefit and religious corporations. Mutual benefit corporations are formed typically to benefit their members. This includes the business leagues and social clubs.
Religious corporations are places of worship such as churches and synagogues.
6. Prepare and file nonprofit Articles of Incorporation
Filing the Articles of Incorporation is a necessary step an essential one, especially when it comes to obtaining federal tax exemption eligibility. You need to file Articles of Incorporation with the Utah Department of Commerce Divisional Corporations and Commercial Code.
However, please ensure that your articles contain the following information:
- The name of your corporation
- The street address of the principal office
- The address of the registered agent’s office and the name of the initial registered agent
- The number of directors on the board
- Whether or not your corporation will have voting members
- The number of shares the organization is authorized to issue
Additionally, your articles must include two very important statements:
- A statement describing the nonprofit’s purpose, including language required by the Internal Revenue Service for tax-exempt status
- A dissolution clause stating what would happen to the company’s assets in the event of liquidation or dissolution
Complete the Articles of Incorporation Form or template and then submit it to the Utah Department of Commerce Divisional Corporations and Commercial Code website.
Upon approval, your nonprofit will receive a Certificate of Incorporation.
7. File an initial report
A Utah nonprofit needs not submit an initial report as it is not a requirement in the state.
8. Secure an EIN (Employer Identification Number)
Every business entity in the state of Utah needs to obtain an Employer Identification Number. This is a unique nine-digit number that is assigned to businesses by the Internal Revenue Service.
It’s simply a way of identifying your company, and every organization in the state will need to obtain one irrespective of whether you plan on hiring employees or not.
, your Employer Identification Number will come in handy when it comes to opening corporate bank accounts, applying for federal tax exemption, and submitting 990 returns to the IRS.
In order to obtain your Employer Identification Number, complete IRS Form SS-4. Thereafter, file the form online. Filing online is the quickest way to obtain your Employer Identification Number.
However, you should take note that the IRS website is only operational during specific hours, so printing your Employer Identification Number before closing the session is highly recommended.
9. Apply for federal tax exemption
One of the final steps in incorporating and forming your Utah nonprofit organization is applying for 501(c)(3) tax-exempt status.
However, before you can go ahead and apply for federal tax exemption, ensure that you’ve already completed the following steps:
- Adopted and ratified your nonprofit’s bylaws and Conflict of interest policy
- Obtained your Employer Identification Number
- Filed the Articles of Incorporation with the required IRS provisions
- Chosen at least three directors who have no relation to each other
Once you’ve gone ahead and completed the above-mentioned steps, you should complete and file Form 1023 online with the Internal Revenue Service. Small business organizations should compete and file Form 1023-EZ.
Once the application has been received, it will be reviewed and approved.
Upon approval, you’ll get an IRS Determination Letter stating that your nonprofit is one of the existing organizations that are now also one of the exempt organizations. The Determination Letter will state that you’re exempt from federal taxes under the Internal Revenue Code.
If the application is not approved, you’ll receive a letter of explanation outlining the reasons as to why the application was declined.
10. Apply for Utah state tax exemption
After your Utah nonprofit has received its Determination Letter from the IRS, it’s time to go ahead and obtain an exemption from state income tax. In order to do this, complete Form TC-161 and file it with the Utah State Tax Commission.
Next, you should go ahead and obtain sales tax exemption by completing Form TC-160 and filing it with the Utah State Tax Commission as well.
11. Other applicable permits and licenses
There is no need to obtain a statewide business license in the state of Utah. However, depending on the services and activities, you plan on running or nonprofit location, you may require one or more licenses or permits to operate in the state. Check with the licensing office in your town or county to determine what’s required prior to running any nonprofit activities.
Additional state registration and reporting requirements
The state of Utah requires that charitable organizations that raise funds, promote, solicit, or sponsor charitable solicitation register by filing an initial application to the Utah Department Of Commerce-Division of Consumer Protection prior to conducting any fundraising activities.
12. Submit an annual report
You will need to submit an annual report on behalf of the nonprofit to keep it in good standing with the state. The annual report will be the need to be submitted online by the due date, which is the end of the month of your initial registration. Submit your annual report to the Division of Corporations and Commercial Code website.
Costs of starting a new nonprofit in Utah
The filing fees below apply to all nonprofits in Utah:
- Filing Articles of Incorporation: $30
- Application for federal income tax exemption or 501(c): $275 or $600 IRS fee
- Utah charitable registration: $100 ($0 if exempt)
After you’ve started your nonprofit, there are a few necessary steps that you should take to keep your organization running smoothly. Let’s take a closer look at them below:
Open a business bank account
- Maintain accounting and tax filing
- Ensure that your personal assets are kept separate from your nonprofits’ assets
To open a bank account, you will need to provide:
- Your EIN
- A copy of your articles of incorporation
- A copy of your organization’s bylaws.
Hire a business accountant
- Simplify payroll and bookkeeping
- Prevent your nonprofit from avoiding penalties and tax errors
- Manage your nonprofit’s funding
- Focus on growing your nonprofit
- Manage risks
You may opt for General liability, Personal liability, or Worker’s compensation insurance.
Build a website
As we mentioned earlier, you may want to create a website for your organization to legitimize your business or give it more credibility. A dedicated website is also one of the best ways to share your nonprofit’s vision, mission, and story with supporters. Consequently, it’s also a great way to announce upcoming events and goals.
Sign legal documents
One aspect that tends to get overlooked is signing legal documents in your personal capacity instead of as an authorized representative of your nonprofit.
If you’ve appointed yourself as a registered agent of the nonprofit, then the following tips will help avoid personal liability:
- State the registered name of your nonprofit
- Use your name and signature
- State your position/role in the organization as its authorized representative
When signing legal documents on behalf of the nonprofit, it is important that you do so in your capacity as the registered agent, as opposed to your capacity as an individual.
Example: Instead of signing your name only, state the name of the nonprofit and then your name and position within the organization before signing.
For-profit companies generate profit for their own benefit. Additionally, they are liable to pay taxes as required by the law. Nonprofit organizations, or charitable organizations, on the other hand, are exempt from paying taxes as they generate profit to benefit society. Donations made to nonprofits are tax-deductible.
A nonprofit’s mission statement essentially describes the organization’s mission or fundamental and unique purpose. It lets potential donors and sponsors Know exactly what you hope to achieve and how you can achieve it. Ultimately, it communicates the value that your organization delivers, the group it will serve, and how it plans on serving this specific group of people.
National Council of Nonprofits is a trusted resource assisting American charitable organizations. They do so by providing training and leadership opportunities as well as making the community aware of the challenges that nonprofit organizations face. Ultimately, the National Council of Nonprofits is a proactive organization whose primary focus is helping nonprofits achieve their purpose.
Nonprofits are not allowed to encourage their members to support or oppose the legislation or participate in political campaigning activities. Nonprofits are also not allowed to have unrelated business income that they do not disclose to the IRS and must at all times operate in accord with stated nonprofit purposes.
Fiscal sponsorships are a great way for nonprofits who are still awaiting their exempt status to start accepting donations. Fiscal sponsorship arrangements allow another nonprofit that has already been granted tax-exempt status to accept tax-deductible donations on your nonprofit’s behalf. However, there is a fee charged by the fiscal sponsor in exchange for accepting these donations for your organization.